COP16 report: A fist full of dollars

Damian Ryan, Senior Policy Manager at The Climate Group, reports on Wednesday's proceedings in Cancun, where finance and the reality of a complex, politically charged negotiation took center stage.

Finance has long been one of the critical pillars of the UN climate negotiations. Going into Cancun a successful outcome on the issue – generally understood by most as the establishment of a new global ‘Green Fund’ – was seen as an essential deliverable from the two week conference.

It was hardly surprising then that a packed audience crowded into a high-level finance briefing today. The subject was the recent report from the UN Advisory Group on Climate Finance (or ‘AGF’). The event was fronted by UN Secretary General Ban Ki-moon, the Prime Ministers of Ethiopia and Norway, and several other international worthies. The meeting was an opportunity for the report’s principle authors to reiterate how $100 billion pa of finance could be mobilized by 2020 to support climate action in developing countries.

The Secretary General explained that finance was the key to building trust amongst parties. He also underlined that climate finance wasn’t about charity. Rather, it was “an investment” to deliver a healthy, prosperous, and secure world. Both PMs emphasized the importance of setting an adequate price on carbon (roughly $20-25/t CO2) in developing countries, to raise funds and incentivize mitigation. They also underlined the political reality, that finance would need to come from both public and private sources (a sensitive issue for some countries). Lord Stern, one of the report’s expert authors, added that the funding was not only compatible with economic growth, but that it was essential to foster a new low-carbon industrial revolution. All expressed the hope that parties would use the report’s findings to help advance the negotiations.

Whether such hope translates into actual progress remains to be determined. Getting some form of agreement in Cancun depends on resolving finance-specific disagreements (such as how and when to define fund modalities), as well as dealing with tactical blocking actions. With respect to the latter, developed countries are continuing to stall on finance until they consider ‘balance’ has been achieved with other areas of negotiation. Transparency of developing country mitigation actions remains the key sticking point. While unfortunate, given that finance is one of the most advance and critical areas, the situation reflects the reality of a complex, politically charged negotiation.

Interestingly, the whole debate on climate finance in Cancun covers only a fraction of the total funding considered necessary for properly addressing climate change. On the mitigation side alone, the International Energy Agency (IEA) provides some revealing figures. It has calculated that an extra $46 trillion in energy-related investment will be necessary globally to achieve a 50% cut in emissions by 2050. The good news is that this extra $46 trillion leads to cumulative savings over 40 years of $112 trillion. A bargain in anyone’s book. Unleashing these sums, however, depends on parties implementing ambitious mitigation targets, setting strong domestic policies to incentivize investment, and the creation of new financial instruments to lower investment risk, particularly in developing countries. Unfortunately, discussion on such topics is largely absent in Cancun.

Getting some balance?

Delivering that all-important ‘balance’ in the negotiations potentially moved one step closer today with the release of new, revised ‘notes’ from the two negotiating track Chairs. These documents, while having no formal status, are designed to capture the progress made by negotiators and potentially serve as the basis for further talks. These were delivered to parties at a short, early morning stock-take session, before officials once again moved behind closed doors to continue the negotiations.

The Convention track note at least, provides some cause for guarded optimism – assuming it is not rejected or heavily reworked by Parties over the coming days. While it will have fallen short of what many might think of as ambitious, it includes substantive options on adaption, mitigation, MRV, finance, deforestation, and technology. Negotiators will no doubt find key issues either missing or on which to disagree in the text. However, when compared to where parties were this time last year in the process, the note – at least on first impressions – seems a significant advance.

Dear friends and colleagues....

Beyond the closed door sessions, observers were able to keep themselves occupied today by the usual variety of side events plus a steady stream of national statements. These were delivered by ministers and the handful of heads of state not frightened off by last year’s experience in Copenhagen.

For negotiators, however, the normal handing over of responsibility to ministers seems to have been put on hold. Mexico, as COP President, appears to have decided to retain the technical experts for a while longer to ensure digestible decisions are delivered to ministers.

For many then, a customary COP finale of late nights and coffee overdose seems to be on the cards. Once again the fate of the world’s climate rests in the hands of a few hundred sleep-deprived, caffeine-addled diplomats. In the festive season, it’s clear that some old traditions die hard.